Board of Directors and Corporate Governance

Author: Yu Dongzhi
Publisher:
Publish Date: 2004-03-01
Features: The first experience analysis framework of board of directors' nature and functions in China, urgently needed for the current state-owned enterprise restructuring in the country. Based on extracting and integrating international advanced theories, this book proposes policy-relevant theoretical hypotheses targeting China's institutional system, partially supported by data from listed companies. It systematically discusses pressing issues in improving corporate boardroom systems, such as board self-assessment, performance management, executive rewards and punishments, and strategic audits, serving as a reference model for Chinese enterprises to establish modern governance systems. In this book, we explore the aforementioned issues from six different perspectives in six chapters. The entire book is divided into three parts: Theoretical Framework (Chapters 1-4), Empirical Research (Chapter 5), and Case Studies (Chapter 6).
Chapter 1 discusses some basic theoretical issues of the corporate boardroom system, including its origin, definition, types, functions, specific characteristics, nature, and effectiveness. The main argument of this chapter is, "The board of directors is an endogenous product of the corporate system. Due to the imperfections of the real-world market environment, this endogenous mechanism may be continuously adjusted with changes and progress in the economic environment, providing space for policy regulation of the board. The key to regulatory efficiency lies in balancing regulation and market power."
Chapter 2 conducts an international comparison of the internal committee systems of corporate enterprises in major market economies to reveal the general characteristics of the current committee systems in corporate enterprises, hoping to provide references and insights for the reform of committee systems in Chinese corporate enterprises.
Chapter 3 discusses the main means by which the board fulfills its functions—"performance management" methods (including budget mechanisms, economic value added systems, and balanced scorecard evaluation systems). The core argument of this chapter is, "The ultimate standard for evaluating the efficiency of management control systems is whether the system can timely and effectively motivate and assist managers in achieving corporate objectives."
Chapter 4 discusses the construction of a board self-assessment system, primarily introducing practices and experiences from international organizations, hoping to inspire Chinese enterprises to build their own distinctive corporate board evaluation systems.
Chapter 5 takes the boards of Chinese listed companies as the research subject, conducting an empirical analysis of the relationship between the leadership structure of the board, independent directors, the size of the board, board stability, the number of annual board meetings, the equity share of directors, and corporate performance. Based on the empirical results, it proposes many targeted policy recommendations.
Chapter 6, "Case Studies," uses the actual performance of boards in corporate governance as material, deeply analyzing the governance implications behind these real stories. This not only helps directors actively and effectively participate in corporate governance but also assists shareholders in protecting their rights and regulators in formulating policies.